Federal Relations Between Centre and State

The Constitution of India establishes a federal system of government. However, it is often described as a 'quasi-federal' or 'federal with a strong unitary bias'. This means that while power is divided between the Union (Central) government and the State governments, the Union government holds more significant authority. The relationship between the centre and the states is multifaceted, encompassing legislative, administrative, and financial aspects. Understanding these federal relations is crucial for comprehending the functioning of Indian governance.

Legislative Relations

The Constitution demarcates the legislative powers between the Union and the States through three lists in the Seventh Schedule:

• Union List (List I): Subjects on which only the Parliament can make laws. There are 100 subjects currently.
• State List (List II): Subjects on which only the State Legislatures can make laws. There are 61 subjects currently.
• Concurrent List (List III): Subjects on which both the Parliament and the State Legislatures can make laws. There are 52 subjects currently.

In case of a conflict between a Union law and a State law on a subject in the Concurrent List, the Union law generally prevails. However, if a State law made earlier on a Concurrent List subject has been reserved for the consideration of the President and has received his assent, then that State law will prevail in that particular State, notwithstanding the Union law.

Residuary Powers

Subjects that are not mentioned in any of the three lists are called residuary subjects. The power to legislate on these residuary subjects lies with the Parliament, as per Article 248. This further strengthens the Union's legislative authority.

Parliament's Power to Legislate in State List

In certain extraordinary circumstances, the Parliament can also legislate on subjects mentioned in the State List. This can happen under the following conditions:

• During a National Emergency (Article 250): When a Proclamation of Emergency is in operation, the Parliament can legislate on any subject in the State List. The law made by Parliament shall cease to have effect at the expiry of six months after the Proclamation has ceased to operate, except in respect of things done or omitted to be done before the expiry.
• On the Recommendation of the Rajya Sabha (Article 249): If the Rajya Sabha passes a resolution by a special majority (two-thirds of the members present and voting) declaring that it is necessary in the national interest that Parliament should make laws with respect to any matter enumerated in the State List, then Parliament can make laws on that matter for the whole or any part of the territory of India. Such a resolution remains in force for a period of one year, but can be renewed by another similar resolution.
• For Implementing Treaties (Article 253): Parliament can make laws for the whole or any part of the territory of India for implementing any treaty, international agreement or convention, even if the subject matter falls in the State List.
• When States Consent: If two or more State Legislatures pass resolutions requesting Parliament to enact a law on a particular subject in the State List, then Parliament can enact such a law, and it will apply to those States which have passed the resolutions.
• President's Rule (Article 356): When the President's Rule is imposed in a State, the President can empower the Parliament to legislate on behalf of the State Legislature.

Administrative Relations

The Constitution ensures cooperation and coordination between the Union and the States in administrative matters.

• Direction to States (Article 256): The executive power of every State must be so exercised as to ensure compliance with the laws made by Parliament and any existing laws which apply in that State. The Union government can give directions to the States for this purpose.
• Power to Give Directions on Certain Matters (Article 257): The executive power of every State shall be so exercised as not to impede or prejudice the executive power of the Union. The Union government can give directions to the States regarding the construction and maintenance of means of communication declared to be of national or military importance, and regarding the measures to be taken for the protection of the railways within the State.
• Delegation of Union Functions (Article 258): The President may, with the consent of the State government, entrust to that government or its officer functions relating to any matter to which the executive power of the Union extends.
• Emergency Provisions: During a National Emergency (Article 352) or Financial Emergency (Article 360), the Union can issue directions to States regarding the manner in which the executive power of the State is to be exercised. During President's Rule (Article 356), the President can assume to himself all or any of the functions of the Government of the State and all or any of the powers vested in or exercisable by the Governor, and can also authorize the Parliament to make laws.
• Inter-State River Disputes (Article 262): Parliament can enact laws to adjudicate disputes relating to waters of inter-State rivers or river valleys. It has set up tribunals for this purpose.
• Public Acts, Records and Judicial Proceedings (Article 261): Full faith and credit shall be given throughout the territory of India to public acts, records and judicial proceedings of the Union and of every State.
• All-India Services (Article 312): The Rajya Sabha, by a special majority, can authorize the creation of one or more All-India Services common to both the Union and the States. These services are administered by the Union government but their members are allocated to various States.
• Inter-State Council (Article 263): The President can establish an Inter-State Council to help coordinate policy and action between the Union and the States, and to inquire into and advise upon disputes that may arise between them.

Financial Relations

The Constitution divides financial powers between the Union and the States. It specifies the sources of revenue for each and outlines the mechanisms for financial assistance from the Centre to the States.

Distribution of Taxing Powers

The Seventh Schedule divides the taxing powers as follows:

• Union List: Taxes like income tax (except agricultural income), corporation tax, customs duties, excise duties on manufactured goods (except alcoholic liquors and narcotics), etc., are levied and collected by the Union government.
• State List: Taxes like land revenue, agricultural income tax, excise duties on alcoholic liquors and narcotics, sales tax (now GST subsumes most of it), taxes on vehicles, taxes on goods and passengers, etc., are levied and collected by the State governments.
• Concurrent List: While no taxes are in the Concurrent List, the GST (Goods and Services Tax) is a significant example of a tax that has subsumed many taxes from both the Union and State lists, requiring coordinated legislation.

Distribution of Tax Revenue

While certain taxes are levied and collected by the Union, their proceeds may be shared with the States. The Constitution provides for:

• Taxes Levied and Collected by the Union but Assigned to States (Article 269): Such as stamp duties on bills of exchange, etc., and taxes on the sale or purchase of goods (except newspapers) in the course of inter-State trade or commerce.
• Taxes Levied and Collected by the Union and Distributed Between the Union and the States (Article 270): This includes income tax (excluding agricultural income) and Union excise duties. The distribution is based on the recommendations of the Finance Commission.
• Taxes Levied and Collected by the Union and Kept Entirely for the Union: Such as corporation tax, customs duties, etc.

Grants-in-Aid to States (Article 275 and 273)

The Union government provides financial assistance to States in the form of grants-in-aid.

• Statutory Grants (Article 275): These are given based on the recommendations of the Finance Commission. They are intended to help States in need of assistance, particularly those facing financial difficulties or requiring funds for specific purposes.
• Discretionary Grants (Article 282): The Union government can also provide discretionary grants for any public purpose, irrespective of whether it falls in the Union List or State List. These grants are given based on the needs and priorities of the States, as determined by the Union government.

Finance Commission

Article 280 provides for the establishment of a Finance Commission every five years. It is a quasi-judicial body that makes recommendations to the President on:

• The distribution between the Union and the States of the net proceeds of taxes which are to be divided between them and the allocation between the States of the respective shares of such proceeds.
• The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India.
• The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the State Finance Commission.

Financial Emergency (Article 360)

If the President is satisfied that a situation has arisen whereby the financial stability or credit of India or any part of its territory is threatened, he can declare a Financial Emergency. During this period, the Union can issue directions to States to observe canons of financial propriety and can also ask States to reduce salaries and allowances of employees. The President can also ask for a reduction in the salaries and allowances of all persons serving in connection with the affairs of the Union.

Trends and Challenges in Centre-State Relations

Over the years, the nature of centre-state relations has evolved. While the initial years saw a strong central government, the rise of regional parties and coalition politics in the later decades led to a greater assertion of states' rights.

• Issues of Autonomy: States often demand greater financial and administrative autonomy.
• Fiscal Imbalances: The unequal distribution of resources and the increasing dependence of states on central grants lead to friction.
• Political Interference: The use of central agencies or the imposition of President's Rule has been a point of contention.
• Role of Commissions: Various commissions, such as the Sarkaria Commission (1983) and the Punchhi Commission (2007), have been set up to review centre-state relations and suggest reforms. These commissions have generally recommended strengthening the federal structure while ensuring national unity and integrity.
• GST Implementation: The introduction of GST has brought about a new dimension to fiscal federalism, requiring continuous coordination through the GST Council.

The Indian Constitution, while providing a strong framework for national unity, also respects the diversity of the country by granting significant powers to the states. The dynamic balance between central authority and state autonomy is a continuous process, shaped by political, economic, and social factors.